PSE&G C.E.O. on energy, green technology, climate change: A Q&A

Star-Ledger file photoRalph Izzo of PSE&G is pictured in this 2007 file photo.

Ralph Izzo runs the state’s largest energy company, PSEG, which includes both the utility and the competitive power producer. A scientist, a baseball fanatic and one of those horribly rich CEOs we like to villainize these days, he is a fervent believer in the dangers presented by climate change.

PSEG has three nuclear plants in New Jersey and is considering building a fourth. It owns gas plants and coal plants as well, and is seeking permission to build a gigantic transmission line across North Jersey. One of the state’s largest firms, it has assets of $30 billion, annual revenues of nearly $12 billion and employs 9,000 people.

Q. First, can you explain why electricity is more expensive in New Jersey than in most other states?

A. The single biggest cost of electricity is fuel, and New Jersey doesn’t have any indigenous fuel. The second is labor, and we have high labor costs. And then all the other high costs, like land and health care.

Q. What about congestion in the electricity system?

A. All the electricity that’s cheaper to produce elsewhere, where fuel is plentiful, wants to come to New Jersey, where it can be used. That creates congestion.

A. It will lower prices. Even though the intention is to ensure reliability, it does so by moving power from eastern Pennsylvania, which is mostly nuclear and natural gas, to New Jersey. Western Pennsylvania is where you have more coal plants.

Q. But doesn’t a transmission line draw on all types of electricity, as if tapping a bathtub where they are all mixed? And isn’t a portion of that coal power?

A. It’s not really a bathtub. It’s a set of interconnecting pipes with big valves. So there will be some coal. But this power will be supplied primarily by the plants in the line’s path, and that would be less coal than nuclear and natural gas.

Q. New Jersey is now offering generous subsidies for construction of natural gas plants, in hopes that a greater supply will reduce prices. Is that going to work?

A. I don’t think so. You’ll be paying the plants above-market prices. So others will say, ‘I’m not going to build because I’m better off waiting for a subsidized contract in the future.’ "

A. No. Because the state is turning toward market mechanisms to get this done for solar. And it is allowing utilities to invest in energy efficiency. Then you can target the beneficiary of the green subsidy. Some of the bigger projects we’ve done are in hospitals, while the smaller ones have been homes.

Q. Who benefits from that?

A. If we invest, we get a fair return on that investment through rates. The customers benefit because they are buying less electricity. So even when the rate goes up, their bills go down.

Q. How much has PSE&G invested in that?

A. $340 million, so far. We hope to do more.

Q. PSEG has been considering building a fourth nuclear plant in South Jersey for years. What are the prospects?

A. With today’s low gas prices, it’s not something a competitive power producer like PSEG can pursue aggressively. We’re taking a go-slow approach, pursuing permits we’d need if we eventually build.

Q. If Washington imposed a cost on burning carbon, that would give nuclear power an edge, right? So does the political stalemate over climate change affect that decision?

A. That’s the second knockout punch. Nuclear’s advantage is that it uses a low-cost fuel and has carbon-free emissions.

A. We’ve not been able to validate a net economic benefit. The state demands that, and it’s a smart policy. Because offshore wind, while it’s emission-free, will be expensive. It’s never been done in this country.